Why is it?

Structured Questions 1. The sale and purchase of narcotics are illegal. Both buyers and sellers are subject to punishment in many countries. What would the effects be on the supply of narcotics if their sale becomes legal? (3 marks) What would the effects be on the demand for narcotics if their purchase becomes legal? (3 marks) What would the changes in the price and quantity consumed of narcotics be if legal controls on their sale and purchase are both lifted? Explain your answer with the aid of a supply-demand diagram. (8 marks) Answers: The supply of narcotics would (increase / decrease) since (buyers / sellers) need not bear the risk of punishment. They are then willing to sell more of the good at every . The demand for narcotics would (increase / decrease) since (buyers / sellers) need not bear the risk of punishment. They are then willing to buy more of the good at every price level. The demand for narcotics would (increase / decrease) and supply of narcotics would (increase / decrease). The quantity consumed would (increase / decrease / be uncertain). The price will (increase / decrease / be uncertain), depending on the extent of the increase in demand and supply: If the increase in demand is (greater than / smaller than / equal to) the increase in supply, the equilibrium price of narcotics would increase. If the increase in demand is (greater than / smaller than / equal to) the increase in supply, the equilibrium price of narcotics would decrease. If the increase in demand is (greater than / smaller than / equal to) the increase in supply, the equilibrium price of narcotics would remain unchanged. (In the diagram below, draw the new demand and supply curves to show the change of equilibrium price and quantity in case